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Xcel Energy withdraws plans to increase fuel costs

A federal court decision has spurred Xcel Energy to rethink its initial decision to raise gas rates for its residential customer base.The decision, which pertains to the delay of a costly new environmental regulation, spurred the decision by Xcel.The update, if it had gone into effect, would have added $6.30 or seven percent, to a typical winter residential bill of 1,000 kilowatt-hours in Texas. Customers in New Mexico eventually would have seen higher fuel costs because customers in both states share the same power generation system.The increases were a direct result of achieving short-term compliance with the U.S. Environmental Protection Agency’s Cross-State Air Pollution Rule, or CSAPR.Xcel Energy learned in July that Texas was to be included in the new rule, aimed at reducing the amount of emissions drifting toward eastern U.S. Cities. The company only had six months before a Jan. 1 implementation date to reduce emissions of sulfur dioxide and nitrogen oxides by as much as 50 percent.The only viable compliance option in the near term was to reduce the output of its coal-fueled power generation fleet and increase production from natural gas-fueled plants. With natural gas being more expensive than coal, the company’s fuel costs would have risen dramatically under CSAPR, at least until the company had a chance to install new emission-reduction technologies on its coal-fueled power plants.On Dec. 30, the Court of Appeals – D.C. Circuit, stayed CSAPR implementation until the court has a chance to review the merits of numerous lawsuits, including a suit filed by Xcel Energy, seeking to block the new rule and devise a more reasonable way to reduce emissions.As a result of the ruling, the company will continue operating its generating fleet as it has always done, calling on low-cost coal-fueled plants first and then adding natural gas-fueled plants as customer demand increases.Even though the court ruling does eliminate the need to switch primarily to natural gas generation at the time, and as a result raise fuel costs for customers, Xcel Energy still must update its fuel cost factor on customer bills because the company’s fuel mix has changed and natural gas prices have decreased since the company had its last update.The company will submit a new fuel cost proposal before the end of January, but the impact on customer bills is not known at this time.As the revised fuel costs are worked out, Xcel Energy will continue its legal effort to block CSAPR and lobby for a plan to better protect customer interests.“We opposed and still oppose CSAPR because of enormous and immediate costs of complying so quickly,” Riley Hill, president and CEO of Southwestern Public Service Company, an Xcel Energy company, said. “Even so, we remain committed to investing in new emission-control technologies, and we hope the court’s decision will allow us to make these investments in a more reasonable timeframe that would ease the financial impact on our customers and maintain the reliability of our generating system.”